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Good for Business: Covering Contraceptive Care Without Cost-Sharing is Is Cost-Neutral or Even Saves Money

July 16, 2014

The debate and legal wrangling over the Affordable Care Act’s contraceptive coverage guarantee, which requires most private insurance plans to cover contraception counseling, services and supplies without additional out-of-pocket costs, has repeatedly veered into an evidence-free zone. Anti-contraception activists have, for instance, attempted to deny that contraception reduces unintended pregnancy, that it yields significant health benefits for women and families, and that it works by preventing pregnancy rather than ending it.

Skeptics and critics of the policy also claim that it imposes a financial burden on employers or insurers. The availableevidence, although not entirely conclusive in the private sector, suggests strongly that coverage of contraception without patient out-of-pocket costs should not raise insurance costs and is likely cost-saving. That is because the cost of contraception is outweighed by the savings from averting unplanned pregnancies, as demonstrated by a significant body of research:

The federal government, the nation’s largest employer, found that “there was no cost increase” after Congress required coverage of contraceptives for federal employees in 1998. This is significant because the population of federal employees closely resembles the privately insured Americans who are now benefiting from the contraceptive coverage guarantee. If requiring contraceptive coverage did not increase costs for the federal government, it is unlikely to increase costs for private-sector health plans.

Studies comparing the cost-effectiveness of contraceptives find that all methods save insurers money, after the costs of unintended pregnancies averted are accounted for—with the most effective methods, such as IUDs and implants, being among the most cost-effective.

More specifically for private employers, both the National Business Group on Health (a membership group for large employers) and Mercer (an employee benefits consulting firm) published studies recommending contraceptive coverage as a cost-saving option for health plans—both because of the savings from fewer insurance claims for pregnancy-related care and from improved employee productivity.

Likewise, a 2007 National Business Group on Health report calls for coverage of the full range of prescription contraceptive services and supplies at “zero cost-sharing…to avoid real or perceived financial barriers, and to increase utilization.” Relying on an actuarial analysis from PricewaterhouseCoopers, the report predicts that savings from this coverage will exceed the costs.

Buttressing this private-sector evidence is a wealth of public-sector data. Data from the Guttmacher Institute show that by helping women avoid unintended pregnancies, public funding for contraceptive services in 2010 resulted in net public savings of $10.5 billion, or $5.68 for every dollar spent. Those savings accrue to Medicaid within the first year of providing contraceptive services.

Similarly, a 2010 Brookings Institution review of government programs to reduce unintended pregnancy found that publicly funded family planning efforts have been effective and cost-saving, and “would be even more so if they could increase the use not just of contraceptives, but of long-acting, reversible contraceptive methods.”

Skeptics and critics counter this evidence with several flawed arguments. First, they cite several actuarial studies—including one sponsored by the Guttmacher Institute in 1998—that seem to document small increases in insurance outlays for providing contraception. However, these studies focus primarily or exclusively on the cost side of contraceptive coverage, without taking into account the significant savings it yields.

Second, these critics often dismiss the strongest evidence—demonstrating the impact of publicly funded contraceptive services under programs like Title X and Medicaid—on the grounds that the women served by these programs tend to be poorer than privately insured women. However, that does not invalidate the underlying point: Rather, these cost savings are so high that, even if the impact is vastly smaller among privately insured women than among those receiving publicly funded services, it is still likely to be significant.

Recently cited estimates of the one-year cost of providing contraceptives range from $100 to $600, while the costs of prenatal care, delivery and newborn care under private insurance, according to one estimate, are around $18,000 for a vaginal birth and $28,000 for a caesarian birth—roughly twice as high as the costs of these services under Medicaid. That means that private insurance saves twice as much for each unplanned pregnancy prevented. In effect, preventing just one additional unplanned pregnancy among dozens of women covered would result in cost savings for an employer or insurer.

Third, some critics have asserted that although the costs of contraception are immediate, any cost savings could be years in the future. That would certainly be true for some other important preventive services, such as lowering blood pressure to prevent heart disease years or decades later. Yet, for contraception, these cost savings accrue almost immediately. A sexually active couple not using contraceptives has an 85% chance of getting pregnant within one year. And once a woman does become pregnant, the need for prenatal care begins almost immediately.

Finally, behind all of these arguments is the idea that private insurance may not save much from covering contraception because women and couples will pay for it on their own even if it is not covered. To the extent that is the case, employers and insurers are reaping a financial windfall from the private spending of employees and their families. Yet, critics are overlooking the fact that contraceptive methods are not interchangeable. Methods of contraception differ dramatically in their effectiveness, and women’s contraceptive needs and choices are influenced by concerns about side effects and drug interactions, how frequently they expect to have sex, their perceived risk of STIs and a host of other factors.

Women who are not completely satisfied with their choice of a method are particularly likely to use it inconsistently or incorrectly, or to experience gaps in use. And research shows that the two-thirds of women who use contraceptives consistently and correctly all year account for only 5% of unintended pregnancies. Removing cost as a barrier to use can significantly improve the effectiveness of contraceptive use by allowing women to pick the method that is best suited for their particular needs and circumstances—especially when it comes to highly effective methods like the IUD and implant that have high upfront costs. Providing comprehensive coverage of contraceptive methods and services is not only sound public health policy but also a savvy business decision.